Life insurance is Protection First, Investment Second

Indians need to ensure that they are protected by a term plan first before they start analyzing life insurance as an investment option.

Life insurance is a financial tool to support the family of an insured’ person after his death. In a nutshell, it acts as a shield at a time when you require utmost protection and security. This is the reason insurance is poles apart from banking, investment or any kind of saving.

Any kind of insurance policy revolves around paying a nominal sum of money by large groups of people as a precautionary measure to protect their beneficiaries in their absence. Insurance aids in financial recovery, especially when the family isn’t prepared to tackle such an unforeseen situation.

The moment you pay the first instalment towards your insurance policy, the family comes under the umbrella of financial protection. This is the reason why most reiterate the importance of a life insurance policy.

The contribution that an insured person makes monthly, half-yearly or annually ensures your family lives a dignified life even when you are no longer around. It could also ensure financial protection when funding your child’s education, marriage or other important objectives.

What is the issue with those who view insurance as investment?

Those who look at insurance as investment generally end up with an inadequate sum assured especially in times of need. In fact, they lose out on the simplest benefits of insurance planning. People who look for investment-oriented rewards through life insurance must consider it at a later point in life when they have enough savings over a period. For those who are in the early years of their work life need to concentrate on the insurance component.

Insurance is an expensive investment, but most people are in favor, since they believe it is a tax-saving instrument. When you invest, you generally expect to gain high returns, but when you invest in insurance-related products, your gains are limited. When you buy insurance, protection of your family becomes a priority, but when you mix investment and insurance, you pay a hefty sum as premium to financially secure your dependents.

What is the solution?

Firstly, one needs to understand that insurance policies necessarily do not have to give ‘returns’, in the way any form of investment does. Insurance providers often offer options such as term plans to cover your family in case of your sudden demise. The only difference is that this policy is applicable for a specific period and requires you to pay a nominal premium. Affordability plays an important part here, since it gives you maximum cover at a reasonable price, so that you do not have to shell out large amounts of money to protect your loved ones.

For some, this might be a deal-breaker, since they do not get anything back, but treat this plan as an umbrella. When it rains, you carry an umbrella to protect yourself. In the same way, when you contribute small amounts at fixed intervals, your family is covered by an umbrella when they need it the most. You are bound to need a large sum of money to live a comfortable life in case the breadwinner dies. Companies like Aegon Life offer term insurance products like iTerm Insurance Plan that provide life cover for up to 100 years, ensuring long-term protection for your family. Besides, it can easily be purchased online and premiums are nominal even if you avail additional benefits. Besides, it also comes with a terminal illness benefit, wherein you get death cover benefits upon diagnosis plus your future premiums are also waived off.

You also have the option to go for monthly payouts or a lump sum amount, whatever suits your needs.

Since the intrinsic nature of an insurance product to protect your loved ones, it is better not to mix it with investment. After all, family comes first!

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Additional Disclaimers

THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER. THE LINKED INSURANCE PRODUCTS DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICYHOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.

For more details on risk factors, terms & conditions please read sales brochures and benefits illustrations carefully before concluding a sale. Products and as such, are subject to risk factors • The premium paid in unit linked life insurance policies are subject to investment risks associated with capital markets and the NAV’s of the units may go up or down based on the performance of fund and factors influencing the capital market and the policy holder is responsible for his/ her decisions • Aegon Life Insurance is only the name of the Insurance Company. Aegon Life iMaximize Insurance Plan and Aegon Life iInvest Insurance Plan is only the name of the unit linked life insurance contract. The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns. The non-guaranteed projected investment returns of 4% and 8% are not guaranteed. Please know the associated risks and the applicable charges, from your insurance Agent or the Intermediary or policy document of the insurer .If death occurs due to suicide within 12 months from the date of commencement of risk or of the Policy, the death benefit is refund of at least 80% of the premium(s) paid provided the Policy is in-force. If death occurs due to suicide within 12 months from the date of revival of the Policy, the death benefit is higher of 80% of the premiums paid till the date of death or the Surrender Value available as on the date of death. If death occurs due to suicide within 12 months from the date of exercising life stage option (resulting in the increase in death benefit), the death benefit is the aggregate of the following: Original Total Sum Assured, plus any increased Sum Assured purchased by exercising the life stage option prior to 12 months from the date of death (due to suicide); plus 80% of the premiums paid for the last increase in Sum Assured. The premiums paid and benefits received are eligible for tax benefits under section 80C and 10 (10D) of the Income Tax Act of 1961, respectively on fulfilment of conditions laid down for availing such benefits. Please consult your tax advisor for details. Goods & Services Tax announced by Government or statutory body in future would be levied as per the applicable laws.